Europe Pressures U.S. to Drop Trump-Era Tariffs

As the E.U. attempts to compel American compliance at the World Trade Organization, Spanish table olive producers prepare to take on the Commerce Department in court.
By Daniel Dawson
May. 16, 2023 16:59 UTC

The European Union has ini­ti­ated a com­pli­ance pro­ceed­ing at the World Trade Organization to pres­sure the United States to drop its tar­iffs on some Spanish table olive imports.

The deci­sion comes eigh­teen months after the WTO ruled that the U.S. tar­iffs vio­lated inter­na­tional rules and four months after U.S. action intended to com­ply with the rul­ing.

The United States has failed to com­ply with the rec­om­men­da­tions and rul­ings,” João Aguiar Machado, the E.U.’s per­ma­nent rep­re­sen­ta­tive at the WTO, wrote in a let­ter to the orga­ni­za­tion that announced the ini­ti­a­tion of the pro­ceed­ing.

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The European Commission has also pub­licly ques­tioned the lack of changes to the U.S. domes­tic leg­is­la­tion despite it hav­ing been judged incon­sis­tent with WTO rules.”

As a result, duties are kept in place, mak­ing it more and more dif­fi­cult for Spanish olive grow­ers and proces­sors to remain in the U.S. mar­ket,” the com­mis­sion added.

While Brussels said attempts to set­tle the mat­ter had failed so far, a spokesper­son for the com­mis­sion told Law360 that the E.U. hopes for con­struc­tive con­sul­ta­tions and remains open to find­ing a nego­ti­ated solu­tion to ensure full imple­men­ta­tion of the WTO rul­ing and removal of the duties.”

However, the fate of the E.U.’s case at the WTO may hinge on the result of a sep­a­rate case that stemmed from the orig­i­nal dis­pute. Aceitunas Guadalquivir v. United States, Coalition for Fair Trade in Ripe Olives, is being lit­i­gated in the U.S. Court of Appeals for the Federal Circuit.

The dis­pute began with a legal action taken by the Coalition for Fair Trade in Ripe Olives in 2017.

The coali­tion of California olive grow­ers and table olive pro­duc­ers, spear­headed by Musco Family Olive Co and Bell-Carter Foods, filed a peti­tion with the U.S. Commerce Department alleg­ing sub­si­dies pro­vided to olive grow­ers by the Spanish gov­ern­ment and the E.U. Common Agricultural Policy (CAP) unfairly ben­e­fited olive pack­ers and exporters who, as a result of the sub­si­dies, could sell their pack­aged table olives in the U.S. at below-mar­ket prices.

The Commerce Department selected Aceitunas Guadalquivir, Angel Camacho Alimentacion and Agro Sevilla Aceitunas S.COOP Andalusia, the three largest ripe table olive pack­ers and exporters to the U.S., as its sam­ple to deter­mine whether Spanish ripe table olive exports to the U.S. were being sub­si­dized.

In July 2018, Commerce Department deter­mined that Spanish ripe table olives were being sub­si­dized. They passed this find­ing on to the U.S. International Trade Commission (ITC), which deter­mined that the sub­si­dized ripe table olive imports mate­ri­ally injured the domes­tic indus­try.

Based on the ITC’s find­ing, the Commerce Department autho­rized anti-dump­ing and coun­ter­vail­ing duties (CVD) rang­ing from 7.52 per­cent to 27.02 per­cent.

The effects of the tar­iffs were imme­di­ate and dev­as­tat­ing for Spanish table olive pro­duc­ers, with exports to the United States falling by 60 per­cent and cost­ing pro­duc­ers hun­dreds of mil­lions of Euros in short order.

In response, the table olive pro­duc­ers and the Spanish Association of Table Olive Exporters and Producers (Asemesa) sued the Commerce Department.

After unsuc­cess­fully defend­ing its posi­tion at the U.S. Court of International Trade twice, the Commerce Department defended its posi­tion on the sub­si­dies in a third court sub­mis­sion. It was imme­di­ately appealed and will be heard in a U.S. Court of Appeals.

The Court of Appeals’ deci­sion will likely be final as any appeal to the U.S. Supreme Court is unlikely to be heard.


Meanwhile, protests in Sevilla and out­cries from Madrid spurred the E.U. to sue the U.S. at the WTO in January 2019. In its com­plaint, the E.U. argued that the U.S. tar­iffs vio­lated inter­na­tional trade rules because the CAP does not pro­vide spe­cial ben­e­fits to table olive pro­duc­ers.

Adding to the pres­sure on Brussels, E.U. offi­cials pub­licly expressed con­cern that the tar­iffs set a dan­ger­ous prece­dent and might encour­age addi­tional lit­i­ga­tion against the CAP.

In November 2021, the WTO ruled in favor of the E.U. and found that anti-dump­ing and coun­ter­vail­ing duties imposed in 2018 by the U.S. on imports of ripe table olives from Spain were ille­gal under inter­na­tional rules.

The WTO ulti­mately agreed with the E.U. that the sec­tion of the U.S. Tariff Act of 1930, cited in the Commerce Department’s deci­sion to impose the tar­iffs, was incon­sis­tent with inter­na­tional trade law.

In its rul­ing, the WTO told the U.S. to bring its mea­sures into con­for­mity” with its General Agreement on Tariffs and Trade and other free-trade rules.

The U.S. declined to appeal the WTO rul­ing and agreed to revise the tar­iffs. However, the Commerce Department kept most of the tar­iffs in place.

The depart­ment also has not pub­licly com­mented on the E.U.’s deci­sion to start a com­pli­ance pro­ceed­ing and did not respond to Olive Oil Times’ request for com­ment.

At the start of the year, California table olive pro­duc­ers re-asserted their sup­port for the tar­iffs, which they claim cre­ate a level play­ing field for national table olive pro­duc­ers.

In January, the Olive Growers Council of California applauded the deci­sion to make only minor tar­iff adjust­ments. It argued that the move fully addresses and resolves all WTO con­cerns.”

The council’s chief exec­u­tive Todd Sanders said he strongly sup­ports” the deci­sion to keep the tar­iffs in place. He did not respond to Olive Oil Times’ request for com­ment.

However, if the WTO decides in the E.U.’s favor before the U.S. Court of Appeals rules on its case and the Commerce Department con­tin­ues inac­tion, the E.U. may apply retal­ia­tory tar­iffs against U.S. imports.

The issues before the WTO and the U.S. Court are dif­fer­ent,” Matthew McCullough, a part­ner at Curtis, Mallet-Prevost, Colt & Mosle LLP, which has rep­re­sented Spanish table olive pro­duc­ers from the onset, told Olive Oil Times.

The WTO has said the law itself is incon­sis­tent and, there­fore, any appli­ca­tion of it ren­ders a mea­sure that is incon­sis­tent,” he added. The only way you fix that and fix the mea­sure is to change the law and then recon­sider the mea­sure.”

The appeal that’s before the U.S. court isn’t about whether the law is ille­gal because it’s U.S. law, and the courts inter­pret U.S. law,” McCullough con­tin­ued. The argu­ment before the court is that the Commerce Department inter­preted the statute incor­rectly and applied a stan­dard in reach­ing an affir­ma­tive find­ing that was incon­sis­tent with the mean­ing of the statute.”

The case hinges on the appli­ca­tion of the stan­dard for sub­stan­tially depen­dent” estab­lished for cer­tain agri­cul­tural prod­ucts by the U.S. Congress in 19 U.S.C. §1677 – 2(1):

19 U.S.C. §1677 – 2(1)business-europe-north-america-europe-pressures-us-to-drop-trumpera-tariffs-olive-oil-times

In the case of an agri­cul­tural prod­uct processed from a raw agri­cul­tural prod­uct in which — (1) the demand for the prior stage prod­uct is sub­stan­tially depen­dent on the demand for the lat­ter stage prod­uct, and (2) the pro­cess­ing oper­a­tion adds only lim­ited value to the raw com­mod­ity, coun­ter­vail­able sub­si­dies found to be pro­vided to either pro­duc­ers or proces­sors of the prod­uct shall be deemed to be pro­vided with respect to the man­u­fac­ture, pro­duc­tion, or expor­ta­tion of the processed prod­uct.

In a brief filed with the court, McCullough argued the Commerce Department mis­ap­plied the stan­dard because it relied on post-cod­i­fi­ca­tion admin­is­tra­tive deci­sions to apply a lower stan­dard” instead of fol­low­ing the stan­dard laid out in the unam­bigu­ous statute and not against its own later deci­sions,” which he con­tends would have been legally cor­rect.

McCullough and his team added that the Commerce Department failed to sup­port its deter­mi­na­tion with sub­stan­tial evi­dence and engaged in arbi­trary deci­sion-mak­ing.”

As a result, they argue that the Commerce Department mis­ap­plied the stan­dard, which resulted in the imple­men­ta­tion of tar­iffs.

The pro­vi­sion of U.S. law that per­mit­ted the Commerce Department to find that sub­si­dies received by olive grow­ers ben­e­fited the proces­sors of those olives, the ripe olive pro­duc­ers them­selves, was incon­sis­tent as such with the SCM [Subsidies and Countervailing Measures] agree­ment,” McCullough said.

When you have an as such’ find­ing about a statute, it means that the statute has to be changed,” he added. I think that is one of the key con­tro­ver­sies now and will be the sub­ject of that [WTO] com­pli­ance pro­ceed­ing.”

As a result of what McCullough believes is the Commerce Department’s mis­in­ter­pre­ta­tion of the stan­dard and mis­ap­pli­ca­tion of the statu­tory pro­vi­sion, there would be no sub­sidy mar­gin.

In other words, the level of sub­si­diza­tion would’ve been de min­imis, which is the equiv­a­lent of zero, and if that had been the result, then the case would’ve been ter­mi­nated,” he said.

The ter­mi­na­tion of the case would remove the Commerce Department’s legal basis for its coun­ter­vail­ing duties because, in terms of injury, the imports issue would’ve been found not sub­si­dized,” McCullough said.

If McCullough and the Spanish table olive pro­duc­ers win their appeal, the CVD tar­iffs could be voided. This may resolve the spe­cific mea­sure at issue in the E.U.’s com­pli­ance com­plaint (the duties on ripe olives) but would not resolve the as such’ find­ing, which would require the U.S. Congress to change the law to become con­sis­tent with the SCM agree­ment.

Arguments in Washington, D.C., are set to begin later this year.


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